Strategic Management: Formulation and Implementation

A Manager's Guide For Evaluating Competitive Analysis Techniques

The efficient selection of appropriate techniques for
a particular situation depends on a three-phase process
of awareness and choice:

* First, what relevant techniques are available and
how do they relate to one another?

* Second, what is the focus and scope of the
competitive arena of interest?

* Third, what constraints on time and other resources
limit the extent of analyses that can be
undertaken?

In order to assist and apply competitive analysis
techniques, John Prescott and John Grant developed a
reference guide consisting in part of profiles describing
various competitive analysis techniques.

The utilization profiles array a diverse set of 21
techniques and evaluate them along 11 important
dimensions.

The techniques described below are sequenced beginning
with broad industry-level techniques and moving to
narrower functional area techniques.

Political and country risk analysis assesses the types
(asset, operational, profitability, personnel) and
extent of risks from operating in foreign countries.

Industry scenarios develop detailed, internally
consistent descriptions of what various future
structures of the industry may be like.

The economists' model of industry attractiveness
analyzes the five basic forces (bargaining power of
suppliers and customers, threat of substitute
products, threat of entry, and industry rivalry)
driving industry competition.

BCG industry matrix identifies the attractiveness of
an industry based on the number of potential sources
for achieving a competitive advantage and the size of
the advantage that a leading business can achieve.

Industry segmentation identifies discrete pockets of
competition within an industry. The bases of segment
identification are often product variety, buyer
characteristics, channels of distribution, and
geography.

PIMS is an ongoing data base of the Strategic Planning
Institute which collects data describing business
unit's operating activities, their industries and
competitors, their products and customers. The purpose
is to assist planning efforts of the participating
businesses.

A technological assessment develops an understanding
of the technological relationships and changes
occurring in an industry.

Multipoint competition analysis explores the
implications of a situation in which diversified
firms compete against each other in several markets.

Critical success factor analysis identifies the few
areas in which a business must do adequately in order
to buy successful.

A strategic group analysis identifies groups of
business which follow similar strategies, have similar
administrative systems, and tend to be affected by
and respond to competitive moves and external events
in similar ways.

Experience curves show the costs of producing a
product (service) decrease in a regular manner as the
experience of producing it increases. The decrease in
costs occurs over the total life of a product.

Stakeholder analysis and assumption surfacing and
testing identify and examine any individual or group
goals that affect or are affected by the realization
of the businesses' goals.

Market signaling is any action by a competitor that
provides a direct or indirect indication of its
intensions, motives, goals, or internal situation.

Portfolio analysis locates a corporation's businesses
along dimensions of industry attractiveness and
competitive position to help managers to make resource
allocation decisions and to evaluate future cash flows
and profitability potential.

Strengths and weaknesses analysis identifies
advantages and deficiencies in resources, skills, and
capabilities for a business relative to its
competitors.

In this chapter, I shall discuss a several portfolio
techniques to help managers with one of the most
challenging aspects of the strategic management process:
sitting priorities and providing a basis for resource
allocation.

However, basic to understanding the
significance of portfolio approach is analysis of the
concept of the product of life cycle, the experience
curve and the Porter Curve.